Crusader says hi

[Crusader]

Hi everyone,

I am Crusader, a single male in his mid 30s, living in Toronto, Canada, originally from Serbia. I am a software developer by profession.

I discovered index fund investing a few years back, and was recently doing calculations about when I could possibly retire, and I think I can do it in 10 years if I play my cards right! This gave me extra motivation. Over the past 10 years (my working years), I've been saving 20-40% of my after-tax income without really trying too hard, and I think I can do 50% relatively easily (the 10 year goal is based on >= 50% savings rate and an annualized inflation-adjusted portfolio performance of >3%, so I am being quite conservative). 50% is the goal for next year, we'll see about after.

One thing I am proud of is how I set up my banking: the goal is to only ever log into the bank about once a year and be done with it, because I have better things to do. The rent (I live in a small cheap-ish apartment) and credit card payments are all automatic, are deducted from the account where my paycheck comes in. I also set up automatic monthly deductions into a portfolio of mutual funds, and the plan is to sell them once a year for cash, and invest the cash into index fund ETFs that I hold long term. This way I avoid monthly trading commission fees. In the account there is a buffer, and if the balance ever goes below that buffer, I get an alert on my phone (so that I can intervene and adjust next month's payment).

I found out about Jacob by randomly searching through the Internet about FIRE, and I like the forum and the nuanced/intellectual discussions (you don't find this on the Internet often these days) and different opinions, and just a community of people that took the "road less traveled".

[wolf]

Welcome Crusader! Have you already included reduced spending into your calculation? There are some(many?) who underestimated such impact on the overall progress, me included.

[Crusader]

Thanks wolf! I am not quite sure what you mean. I used a compound interest calculator @3% interest using the investments I have now with the added monthly investments I plan to invest (50% of after tax income).

[wolf]

I guess you have then a net worth goal in mind? Usually it is based on a SWR calculation, e.g. 15.000$ spending p.a. with 3.5% Withdrawal Rate = 428.571$

[2Birds1Stone]

I think wolf is implying that by focusing on the expenses side of the equation, to increase savings rate, you drastically reduce the time to FI. So if you were spending 60-80% of your income, and the new normal becomes 40-50%, the time horizon improves drastically.

[Crusader]

Yes, I have a net worth goal of 2020 money in mind (so that I can comfortably live with <=4% of that goal). I am already assuming I will be able to maintain 50% saving rate. If I push this to 60% and the stock market does really well (8% minus 2% inflation), then the 10 years becomes 7 years, but I don't think this is likely, especially in this day and age. Besides, going from 50% to 60+% would impact my quality of life by quite a lot (negatively), while going from 20-40% to 50% doesn't.

[Chris]

Hi everyone,

I am Crusader, a single male in his mid 30s, living in Toronto, Canada, originally from Serbia.
...
was recently doing calculations about when I could possibly retire, and I think I can do it in 10 years if I play my cards right!

So you'd be able to retire in Toronto in 10 years?

If you were to retire in Serbia (or live there part time), would you be FI already?

[Crusader]

@Chris
Kind of. If I were to retire in Belgrade, which is the most expensive city and where all my friends and family are, I would have an income comparable to the local mean salary in Belgrade. I would still have to live frugally (even by local standards) and I would really have to focus to save up money if I wanted to travel, and it would have to be cheap travel. In other words, I wouldn't be at the point where money no longer mattered to me.

Mentally, also, I don't think I would be able to "accept" the fact that I lived for so long in Canada, only to return to Serbia to live frugally, even if the benefit is having all the free time in the world. Regarding that, I am not quite sure I would know what to do with myself (but my friends who know me well don't think this would be a problem for me as I am always out and about).

[Crusader]

Just to be clear, I haven't decided exactly how/where I want to retire (Canada, Serbia/Canada part time, Serbia, somewhere else?), because from experience, life circumstances change.

[slsdly]

Welcome! I'm also in Toronto, mid 30s, software developer, single male. I've been thinking about returning home lately, although that is still in Canada, just not nearby. Mostly it just feels good to have options I could accept. While I have no problem renting, I've seen too many friends impacted by fires, bed bugs, awful neighbours to not have an exit plan in mind should things go south... buying property anywhere in southern Ontario and retiring before 60 seems increasingly unlikely.

[Crusader]

Hi slsdly, fellow Torontonian! Well, this is why I rent... I am not responsible for any kind of repair and I can leave at any time. Real estate in Toronto is crazy, it would be ridiculous to want to buy a shoe-box apartment with one parking spot for $500K CAD (and houses are even worse) and then have to shell out money for repairs because the condo corporation needs to fix the roof or something... and pay property taxes.

[disk_poet]

Welcome I am also in software and in my mid/late 30s and just arrived.

One thing I am proud of is how I set up my banking: the goal is to only ever log into the bank about once a year and be done with it, because I have better things to do.

That is something to be proud off. I think I am way too hands-on and would like to free that time up. How did you get there? Do you have your spending/life on rails and developed a bunch of routines that are now just running on autopilot? Would like to hear if that was a journey for you or something that just came naturally. If you don't mind sharing. Thanks

[Crusader]

How did you get there? Do you have your spending/life on rails and developed a bunch of routines that are now just running on autopilot? Would like to hear if that was a journey for you or something that just came naturally.

Hey, I don't mind sharing at all! So, a colleague of mine told me about a banking hack he did to manage to have unlimited transactions on a bank account while only having the most basic bank account. In Canada, we have different tiers of bank accounts, and there is a monthly fee, unless you have a minimum amount on the account (something like $1000 for the most basic one, and $5000 for the highest tier one). The main reason why somebody would want to get a higher tiered account is because you have more free transactions per month (e.g. when you use an ATM machine). But, what you can do is open a line of credit, which is actually just another account, and you can change the default "checking" account on your debit card to be the line of credit, and then you can effectively use your line of credit as your main account (and you would have a negative balance on it, i.e. not using it as a credit account at all). I've been doing that for years, and when I started thinking about FIRE seriously, I was wondering how far I can go with optimizing my banking.

So, what I have set up right now is:
-> My paycheck goes directly to my line of credit account
-> I set up pre authorized debit for my rent and credit card(s) to take money from my line of credit (the statement balance is paid in full)
-> I set a monthly "payment" to my brokerage cash account from my line of credit (on the 1st of the month) in the amount of $1000 (scale as necessary)
-> On the brokerage side, I set up an automatic investment (on the 15th of the month) into a mutual fund index fund with no comission. Say my amount that I want to invest every month is $1000: $200 into Canadian fixed income (bonds/whatever), $200 into Canadian stocks, $200 into US stocks, $200 into international stocks, $200 into Canadian fixed income, in this order. If I have insufficient funds for some reason, that last $200 might not go through, but that's ok, the portfolio will be balanced enough even without it, and it would be more balanced than if I had simply fixed percentages (e.g. 25% into fixed income, 25% into Canadian equity, 25% into US equity, 25% into international equity... then if the last investment falls through, I have nothing in international equity).
-> On the bank side, if my line of credit ever reaches a positive balance, the minimum payment is automatically deducted from my official checking account. The checking account is never used except for this situation, so it has to have a minimum amount to waive the fees + some buffer that will last a long time paying off minimum payments. It should be noted that if one month, I am, say $200 short on cash, and my line of credit ends up with a positive balance, and the next month, I "catch up" and have $1200 free cash, everything goes back to normal.
-> Once a year, when I get my tax return and know how much money I can invest in the government tax free and/or tax deductible accounts, I sell all the mutual funds I have for cash and buy index ETFs that I hold long term, and re-balance the portfolio if needed. There might be a minimum holding period for mutual funds that you have to be mindful of (30 days for the ones I buy), so you might have to leave some (~$1000) mutual funds invested to not trigger penalties.
-> I also have some matching pension plan contribution from my employer, and instead of just saving cash, I set up automatic investments into a similar portfolio on that side as well.
-> In reality, my checking account is the highest tier account (I have to maintain a minimum balance of $5000) because my bank offers the holders of that account a premium credit card for free, through which I get other benefits (free emergency travel insurance in my case, for up to 21 days). I have 2 other credit cards which are free. One offers me 1.5% of cashback on all purchases, and the other one offers me free car roadside assistance (towing).

I think that is all, if anything is not clear, please feel free to ask! I understand all of this won't apply to you, but some of it might. If anyone is from Canada, I can go into more Canadian specific details, but I tried to keep it general.

[disk_poet]

@Crusader Wow thanks for the detailed answer. It just blew my mind how different banking systems are and also what responses and hacks that elicits from their customers.

I like your hack regarding the mutual funds. Smart to split out the Canadian Fixed income to have a more balanced portfolio. I will put that trick in my backpocket.

You also inspired me to automate my finances more. I do a lot of the transactions manually but there is no real a reason for it. I could do a regular check-in and just leave it alone most of the time. I want to be smart about savings and finances but not think/worry about it all the time. I think automating stuff away can be one step towards that goal.

Did you notice any changes after you implemented strategy? Personally or systemic?

[Crusader]

@disk_poet No problem! Well, I am the kind of person who doesn't like stress and am also forgetful and scatterbrained, so having to worry about paying off my credit card every month is not good for me. Once I forgot to pay (even though I had money) and I got one of those "you missed the minimum payment" letters that scared me. And then I decided that I have to automate this as much as possible. It just gives me one less thing to worry about, and now this includes investments as well. Maybe one day I'll take a more direct investment strategy, but for now, this is perfect for me.

Regarding the Canadian bond index, it's just a way to diversify my portfolio, which is 75% index stocks and 25% fixed income. Another colleague of mine told me of a blog that teaches Canadians index investing (feel free to PM me if you want it, I don't want to advertise it here, although they are not really selling anything). I often wonder how our life is just a matter of pure luck sometimes. Had one colleague not told me about that banking hack, and had the other one not told me about the blog, who knows how my finances would be right now. It's kind of sad that these hacks are not common knowledge and you have to go against the grain to implement them. Anyway, I believe the reason why the fixed income portion of my portfolio is in Canadian bonds is because there is a tax benefit of holding Canadian investments, but I don't know the details. There are also exchange rate considerations that I don't fully understand.